Data is the new oil.
An article by the World Economic Forum reveals that the entire digital universe will be generating 44 Zettabytes of data by 2020.
That’s a humongous amount of data getting generated!
Of course, not all of them are related to financial reporting, but we cannot undermine the fact that in the years to come, organizations will have to find ways to cope with the data explosion.
Few organizations have already started using Big Data for financial reporting. It helps them to create accurate financial reports, which are then consumed by their customers and stakeholders to make informed business decisions.
According to Oneguard’s 2019 FinTech Barometer, 63% of the surveyed CFOs admitted that in the next five years, organizations cannot do without adopting Big Data.
What is Big Data, and how will it help organizations and regulators?
Investopedia defines Big Data as large, diverse sets of information that grow at an ever-increasing rate.
It helps organizations to identify trends in business, apply business intelligence, and make informed business decisions. At a more complex level, Big Data helps organizations in their forecasting process and in reducing the cost of errors by detecting risks and errors in the data.
Besides helping organizations, Big Data is highly useful to regulators as well.
Recently, the Securities & Exchange Commission (SEC) started using Big Data analytics to monitor suspicious trading activities in real-time on U.S. stock exchanges. It helped the SEC to collect data on all orders and trade activities and use analytics to detect fraud at an early stage.
The challenges with Big Data and how XBRL can help in overcoming it
Despite the benefits it offers to organizations and regulators, Big Data comes with its own set of challenges.
Lack of experts:
Most organizations face the issue of resource shortage. They are unable to find the right people who can manage and analyze a large amount of data that an organization receives/generates. This creates a bottleneck for the organizations to make the most out of Big Data.
Lack of data integrity:
Although Big Data can help in improving the quality and accuracy of financial reports, the problem arises when the data is received from various sources. This makes it difficult for organizations to validate the veracity of data.
Lack of standardization:
Data is available in different formats. Let’s take something as simple as the invoices sent by your vendors. Some of your vendors may send you a printed invoice, while others may send it via email or as a PDF attachment. You will have to standardize the data so that you can enter it into your accounting software. The vendor invoice is just one tiny example. As an organization, you will have to deal with different types of unstructured data, which cannot be read by the machines. Without standardization, Big Data cannot be used effectively. SP Kothari, the chief economist and director of the SEC, explains that Big Data is characterized by the 3 V’s – the Volume of data, the Velocity at which the data is created and stored, and the Variety of formats in which the data is available.
Kothari further explains that while one has little or no control over the data volume or the velocity in which it is created or stored, there can be certain control exercised on reducing the variety of the data. Organizations and regulators can derive maximum value from Big Data only if it is available in a standardized and machine-readable format.
That’s where eXtensible Business Reporting Language (XBRL) will play a vital role.
XBRL is an open-source business reporting language used globally. It helps standardize data and make it machine-readable. Having structured data makes it easier for an organization to process their data faster and enables them to compare large amounts of data more efficiently. It also saves organizations from wasting time on standardizing the data, leaving them with more time to perform analysis on their data sets.
Likewise, XBRL also enables the regulators to detect frauds and risks at an early stage, thanks to its data tagging feature, which standardizes the data, based on the rules determined by the regulatory bodies. It saves the regulatory bodies from spending too much time and resources on data aggregation, enabling them to instead focus on improving data analyses and investor relations.
How entities in South Africa can use both to strengthen their financial reporting
South Africa has the vision to transform its public and private sectors by 2030 digitally. According to IDC, many entities in South Africa have already started prioritizing business intelligence and Big Data analytics to make informed business decisions.
In a similar vein, the CIPC made it mandatory for the entities to lodge their Annual Financial Statements (AFSs) in iXBRL (inline XBRL makes the data both machine and human-readable) format to bring standardization and transparency to financial reporting.
This allows the entities to leverage the capabilities of iXBRL and Big Data to present a more detailed and accurate financial report that can help investors and regulators to get a better sense of the entity’s financial health.
They can utilize the capabilities of iXBRL to standardize it for the implementation of Big Data analytics and use it to extract invaluable insights.
How IRIS is helping countries to expand its XBRL footprint
Since its inception in 2005 IRIS has been a pioneer in the XBRL reporting space. IRIS has also implemented the entire iXBRL platform for the CIPC to receive the lodged AFS in iXBRL. With 20 years of experience, we have filed over 5+ million filings for 1.5+ million entities. We are on a mission to guide entities and regulators worldwide in adopting XBRL and bringing transparency to business reporting.
